FCC’s War on Set-Top Boxes is Short-Sighted and a Costly Distraction

January 28, 2016

WASHINGTON D.C. — Yesterday, FCC Chairman Tom Wheeler announced his plans to force pay-tv or multichannel video programming distributors (MVPDs) to change their existing equipment to allow third-party set-top boxes to carry their signals. Currently, MVPD subscribers typically pay $15–20/month to lease set-top boxes from their cable, satellite, or telco video provider. Those set-top boxes allow subscribers to view video programming on their TVs and, in some cases, also provide access to online video distributors (OVDs) such as Netflix and Hulu. However, Chairman Wheeler and some interest groups say those leasing fees are too high, that MVPDs have a stranglehold on video programming, and that the set-top box market must be opened to competition from third parties.

In 2010, first with its CableCARD and then with its AllVid proposals, the FCC sought to open up the set-top box market by mandating the adoption of standards that were open and interoperable with third party equipment. However, these plans wound up being expensive to implement — because TV programmers need strong security to protect their copyrighted content — and eventually the FCC decided any potential benefits from the proposal would not justify its costs.

“We’ve been down this road before — it didn’t make sense in 2010 and it makes even less sense now,” said Tom Struble, Policy Counsel at TechFreedom. “Consumers have never enjoyed more ways to watch video. The market for video is fiercely competitive — Amazon and Google offer cheap ways to stream content to TVs from computers and mobile devices, and Netflix now has more subscribers in the U.S. than any MVPD. And even when people still subscribe to cable, they’re increasingly watching video over-the-top, as major companies like DISH and Comcast have launched OVD services.”

“Getting the government involved in product design is a terrible idea,” continued Struble. “Mandating that MVPDs change their technology is costly and may subject their content to widespread piracy. There are better ways to promote competition in video markets. Instead of selectively focusing on the marginal issue of set-top boxes, the FCC should focus on making broadband deployment easier and promoting facilities-based competition at the local level between MVPDs. That, more than anything, would help drive innovation, keep prices down, and promote continued growth in the market for video content.”

“It’s clear that politics is behind the FCC’s push for a set-top box mandate,” concluded Struble. “As the debate over net neutrality and Title II demonstrated, the FCC is perfectly comfortable with picking winners and losers in the marketplace. It’s no surprise that the companies on the short end of the set-top box proposal are the same firms challenging the FCC’s Open Internet Order in court. Even with MVPDs in decline and OVDs on the rise, the FCC is charging blindly into more regulation without showing a need for new rules or studying the potential adverse effects of disrupting existing business arrangements.”

Tech Freedom is a non-profit, non-partisan technology think tank launched in 2011. TechFreedom is excited about the future. Focusing on issues of Internet freedom and technological progress, we work to protect innovation and discovery from powers that fear change. Technology is the great driver of social progress and human well-being, and we aim to keep it that way.